IH Signed FS 2021 EN

Insurance House P.S.C. Financial Statements For the year ended 31 December 2021

Insurance House P.S.C. Financial Statements For the year ended 31 December 2021 Table of contents Page Chairman’s report

1-2

Independent auditor’s report

3-6

Statement of financial position

7

Statement of profit or loss

8

Statement of comprehensive income

9

Statement of changes in equity Statement of cash flows Notes to the financial statements

10-11 12 13-40

Grant Thornton UAE - Abu Dhabi

Independent Auditor’s Report To the Shareholders of Insurance House P.S.C.

Office 1101, 11th Floor Al Kamala Tower Zayed the 1st Street Khalidiya Abu Dhabi, UAE T +971 2 666 9750

Report on the Financial Statements Opinion We have audited the accompanying financial statements of Insurance House P.S.C. (the “Company”), which comprise the statement of financial position as at 31 December 2021, statement of profit or loss, statement of comprehensive income, statement of changes in equity and statement of cash flows for the year then ended and notes to the financial statements, including a summary of significant accounting policies.

In our opinion, the accompanying financial statements give a true and fair view of the financial position of the Company as at 31 December 2021, and of its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards (IFRS).

Basis for Opinion We conducted our audit in accordance with International Standards on Auditing (ISA). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Company in accordance with the International Ethics Standards Board for Accountants’ Code of Ethics for Professional Accountants (IESBA Code), and we have fulfilled our other ethical responsibilities in accordance with the requirements of the IESBA Code.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Key Audit Matters Key audit matters are those matters that, in our professional judgment, were of most significance in our audit of the financial statements of the Company for the year ended 31 December 2021. These matters were addressed in the context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. i)

Valuation of technical provisions The estimation of liabilities arising from insurance contracts such as unearned premiums reserve, claims under settlement reserve, incurred but not reported claims reserve and unallocated loss adjustment expenses reserve as disclosed in Note 13 to the financial statements, involves a significant degree of judgement. These liabilities are based on the pattern of risk distributions over coverage period, the bestestimated ultimate cost of all claims incurred but not settled at a given date, whether reported or not, together with the related claims handling costs and persistency (including consideration of policyholder behavior). Actuarial computations have been used to determine these provisions. Underlying these computations are a number of explicit or implicit assumptions relating to the expected settlement amount and settlement patterns of claims. Since the determination of such a provision requires the expertise of an external valuation expert who incorporates significant assumptions, judgements and estimations, the valuation of these liabilities was significant to our audit.

© 2021 Grant Thornton UAE - All rights reserved. Grant Thornton UAE represents all legal licenses under which Grant Thornton Audit and Accounting Limited, A British Virgin Islands registered company, operate in the UAE. These licenses include the Abu Dhabi based branch – Grant Thornton Audit and Accounting Limited – registered with the Abu Dhabi Global Market and the Dubai based branch – Grant Thornton Audit and Accounting Limited (BVI) – registered with the Dubai Financial Services Authority.

“Grant Thornton” refers to the brand under which the Grant Thornton member firms provide assurance, tax and advisory services to their clients and/or refers to one or more member firms, as the context requires. GTIL and the member firms are not a worldwide partnership. GTIL and each member firm is a separate legal entity. Services are delivered by the member firms. GTIL does not provide services to clients. GTIL and its member firms are not agents of, and do not obligate, one another and are not liable for one another’s acts or omissions.

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Independent Auditor’s Report To the Shareholders of Insurance House P.S.C. (continued) Key Audit Matters (continued) We assessed management’s calculations of the technical reserves by performing the following procedures:

ii)



We have obtained the report prepared by the independent actuary which was appointed by the Company.



We involved our actuarial specialists to assist us in performing the audit procedures in this area, which included amongst others, review of methodology, data used as input, and estimates and judgements used in the Actuary’s valuation.



We have assessed the Actuary’s independence, expertise and qualifications and read their terms of engagement to determine whether there were any matters that might have affected their objectivity or may have imposed scope limitations upon their work.

Revenue recognition

Gross premiums comprise the total premium receivable for the whole period of cover by contracts entered into during the accounting period, and are recognised on the date on which the policy commences. At the end of each year, a proportion of net retained premiums is provided for as an unearned premium reserve to cover portions of risk that have not expired at the reporting date. The reserve is required to be calculated in accordance with the requirements of the UAE Insurance Law relating to insurance companies.

We assessed management’s calculation of gross premiums amounting to AED 207,314,824 and net unearned premium reserve amounting to AED 41,796,550 (Note 13) by performing audit procedures, which included among others: 

We assessed whether the Company’s revenue recognition policies complied with IFRS and tested the implementation of those policies. Specifically, we considered whether the premium on policies are accounted for on the date of inception of policies, by testing a sample of revenue items to policy contracts.



We evaluated and tested the operating effectiveness of the internal controls over the recording of revenue in the correct period.



We compared the unearned premium reserve balance as per the financial statements to the reserve balance computed by the Company’s actuary.



We recalculated the unearned premium reserve based on the earning period of policy contracts existing as of 31 December 2021.

Other Information Management is responsible for the other information contained in the financial statements which comprises the information included in the Chairman’s Report, but which does not include the financial statements and our auditors’ report thereon.

Our opinion on the financial statements does not cover the other information and accordingly we do not express any form of assurance conclusion thereon.

In connection with our audit of the financial statements, our responsibility is to read the other information identified above and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

4

Independent Auditor’s Report To the Shareholders of Insurance House P.S.C. (continued) Responsibilities of the Management and Those Charged with Governance for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with IFRS and their preparation in compliance with the applicable provisions of the UAE Federal Law No. 2 of 2015, as amended, and UAE Federal Law No. 6 of 2007, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is responsible for assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.

Those charged with governance are responsible for overseeing the Company’s financial reporting process.

Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISA will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.

As part of an audit in accordance with ISA, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: 

Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.



Obtain an understanding of internal controls relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control.



Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management.



Conclude on the appropriateness of management’s use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on the Company’s ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor’s report. However, future events or conditions may cause the Company to cease to continue as a going concern.



Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation.

5

Independent Auditor’s Report To the Shareholders of Insurance House P.S.C. (continued) Auditor’s Responsibilities for the Audit of the Financial Statements (continued) We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.

We also provide those charged with governance with a statement that we have complied with relevant ethical requirements regarding independence, and communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.

From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current year and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.

Report on Other Legal and Regulatory Requirements Further, as required by the Federal Law No. 6 of 2007 on the Establishment of the Insurance Authority and Organisation of the Insurance Operations and UAE Federal Law No. 2 of 2015, as amended, we report that: i)

we have obtained all the information and explanations we considered necessary for the purposes of our audit;

ii)

the financial statements have been prepared and comply, in all material respects, with the applicable provisions of the Federal Law No. 6 of 2007 on Establishment of the Insurance Authority and Organization of the Insurance Operations and UAE Federal Law No. 2 of 2015, as amended;

iii)

the Company has maintained proper books of account;

iv)

the financial information included in the Chairman’s Report, in so far as it relates to these financial statements, is consistent with the books of account of the Company;

v)

as disclosed in note 5 to the financial statements, the Company has purchased and sold certain shares during the year ended 31 December 2021;

vi)

note 18 to the financial statements discloses material related party transactions, and the terms under which they were conducted; and

vii)

based on the information that has been made available to us, nothing has come to our attention which causes us to believe that the Company has contravened during the financial year ended 31 December 2021 any of the applicable provisions of the Federal Law No. 6 of 2007 on the Establishment of the Insurance Authority and Organization of the Insurance Operations and UAE Federal Law No. 2 of 2015, as amended, or of its Articles of Association, which would materially affect its activities or its financial position as at 31 December 2021.

GRANT THORNTON Dr. Osama El-Bakry Registration No: 935 Abu Dhabi, United Arab Emirates 10 February 2022 6

Insurance House P.S.C. Financial Statements Statement of profit or loss For the year ended 31 December 2021 Notes

2021 AED

2020 AED

207,314,824 (78,751,861) (5,806,642) 122,756,321 11,674,447 134,430,768 16,546,396 (26,250,798) 124,726,336

217,371,704 (77,800,645) (6,938,884) 132,632,175 17,540,933 150,173,108 10,925,538 (25,015,434) 136,083,212

Gross claims paid Reinsurance share of insurance claims and loss adjustment Net claims paid Increase in claims under settlement reserve Decrease / (Increase) in reinsurance share of claims under settlement reserve Increase in incurred but not reported claims reserve – net

(147,136,773)

(152,570,446)

84,914,782 (62,221,991) (9,405,647)

72,608,170 (79,962,276) (1,721,586)

8,769,840

(532,546)

(2,818,369)

(2,028,500)

Increase in unexpired risk reserve (Increase) / Decrease in unallocated loss adjustment expenses reserve – net Net claims incurred

(252,338)

-

(707,900) (66,636,405)

32,988 (84,211,920)

Other underwriting income Other underwriting and claim handling expenses Net underwriting income Income from investments - net Other income Gross income General and administrative expenses Profit for the year

1,997,184 (13,605,630) 46,481,515 5,053,325 51,534,840 (42,014,884) 9,519,956

4,626,366 (9,492,896) 47,004,762 6,814,389 18,315 53,837,466 (42,951,587) 10,885,879

0.08

0.09

Gross premiums Reinsurance share of premiums Reinsurance share of ceded business premiums Net premiums Net transfer from unearned premium reserve Net premiums earned Commission earned Commission paid Gross underwriting income

19

14 15

Earnings per share: Basic and diluted earnings per share

16

The notes from 1 to 24 form an integral part of these financial statements.

8

Insurance House P.S.C. Financial Statements Statement of comprehensive income For the year ended 31 December 2021 Notes

2021 AED

2020 AED

9,519,956

10,885,879

-

(352,021)

-

120,401

5

9,352,764

727,492

5

885,174 (883,409) 18,874,485

Profit for the year Other comprehensive income

Items that will not be reclassified subsequently to profit or loss

Realised gain / (loss) on disposal of equity investments carried at FVTOCI Impairment loss on debt investments carried at fair value through other comprehensive income – reclassified through profit or loss Changes in fair value of equity investments carried at fair value through other comprehensive income

Items that will be reclassified subsequently to profit or loss

Changes in fair value of debt investments carried at fair value through other comprehensive income Directors’ remuneration Total comprehensive income for the year

The notes from 1 to 24 form an integral part of these financial statements.

9

(486,805) (979,729) 9,915,217

Insurance House P.S.C. Financial Statements Statement of changes in equity For the year ended 31 December 2021

Balance as at 1 January 2021 Dividends declared (Note 10) Profit for the year Transfer to statutory reserve Transfer from reinsurance reserve Other comprehensive income for the year Proposed Board of Director’s remuneration Payment of Board of Directors’ remuneration Adjustment to Board of Directors’ remuneration Loss on disposal of investment carried at FVTOCI Transfer of unrealised loss on disposal of debt investments carried at FVTOCI Tier 1 Capital Balance as at 31 December 2021

Share capital

Tier 1 capital

Accumulated losses

Investment revaluation reserve AED

Legal reserve

AED

Total shareholders’ equity AED

AED

AED

AED

118,780,500 -

15,000,000 -

(5,446,912) (4,751,220) 9,519,956 (951,996) 905

979,729 -

423,698 (905)

20,861 -

6,291,675 951,996 -

136,049,551 (4,751,220) 9,519,956 -

-

-

-

-

-

10,237,938

-

10,237,938

-

-

(856,796)

856,796

-

-

-

-

-

-

-

(937,360)

-

-

-

(937,360)

-

-

42,369

(42,369)

-

-

-

-

-

-

(3,867,499)

-

-

3,867,499

-

-

118,780,500

15,000,000

(1,237,500) (7,548,693)

856,796

422,793

144,795 14,271,093

7,243,671

144,795 (1,237,500) 149,026,160

The notes from 1 to 24 form an integral part of these financial statements.

10

Board of Reinsurance Directors’ reserve remuneration AED AED

Insurance House P.S.C. Financial Statements Statement of changes in equity (continued) For the year ended 31 December 2021

Balance as at 1 January 2020 Dividends declared (Note 10) Profit for the year Transfer to statutory reserve Transfer to reinsurance reserve Other comprehensive income for the year Payment of Board of Directors’ remuneration Proposed Board of Director’s remuneration Transfer of realised loss on disposal of equity investment carried at FVTOCI Transfer of unrealised gain on disposal of equity investments carried at FVTOCI Transfer of unrealised loss on disposal of debt investments carried at FVTOCI Tier 1 Capital Balance as at 31 December 2020

Share capital

Tier 1 capital

Accumulated losses

Board of Reinsurance Directors’ reserve remuneration AED

AED

AED

AED

118,780,500 -

15,000,000 -

(8,920,743) (4,751,220) 10,885,879 (1,088,588) (423,698)

1,454,955 -

-

-

-

-

-

-

Legal Total reserve shareholders’ equity AED AED

423,698

865,535 -

5,203,087 1,088,588 -

132,383,334 (4,751,220) 10,885,879 -

-

-

361,088

-

361,088

4,955

(1,454,955)

-

-

-

(1,450,000)

-

(979,729)

979,729

-

-

-

-

-

-

(352,021)

-

-

-

-

(352,021)

-

-

1,415,753

-

-

(1,415,753)

-

-

118,780,500

15,000,000

(1,237,500) (5,446,912)

979,729

423,698

209,991 20,861

6,291,675

209,991 (1,237,500) 136,049,551

The notes from 1 to 24 form an integral part of these financial statements.

11

-

Investment revaluation reserve AED

Insurance House P.S.C. Financial Statements Statement of cash flows For the year ended 31 December 2021 Note

OPERATING ACTIVITIES Profit for the year Adjustments for non-cash items: Depreciation of property and equipment Changes in fair value of investment carried at FVTPL Realised gain on sale of investments carried at FVTPL Realised loss on sale of debt investments carried at FVTOCI Interest and dividend income Provision for employees’ end-of-service benefits Expected credit losses Operating profit before changes in working capital Changes in working capital Premium and insurance balances receivables Reinsurance contract assets Technical provisions Other receivables and prepayments Insurance and other payables Net cash flow (used in) / generated from operating activities Employees’ end-of-service benefits paid Directors’ remuneration Net cash flow (used in) / generated from operating activities INVESTING ACTIVITIES Payments for purchase of property and equipment Proceeds from sale of investments carried at FVTOCI Purchase of investments carried at FVTPL Proceeds from sale of investments carried at FVTPL Proceed from redemption of short-term investments Payments for fixed deposits Interest and dividend received Net cash generated from investing activities FINANCING ACTIVITIES Tier 1 Capital Dividends paid Net cash used in financing activities Net change in cash and cash equivalents Cash and cash equivalents, beginning of the year Cash and cash equivalents, end of the year

2021 AED

2020 AED

9,519,956

10,885,879

4 14 14

1,652,709 (675,387)

1,843,455 (381,687)

(428,993)

(1,164,015)

14 14 11 15

164,493 (3,948,945) 420,674 1,124,458 7,828,965

159,350 (5,428,037) 603,272 1,022,416 7,540,633

(28,165,225) (35,055,205) 27,795,174 (85,214) 9,403,545

(3,789,087) 3,885,623 (17,176,912) (576,083) 14,534,974

(18,277,960) (790,600) (937,360)

4,419,148 (127,992) (1,450,000)

(20,005,920)

2,841,156

(1,564,810)

(3,987,615)

4,437,578 (3,152,212) 2,562,016 2,000,000 3,942,802 8,225,374

10,771,227 (5,997,765) 10,596,279 (16,000,000) 5,428,037 810,163

(1,237,500) (4,751,220) (5,988,720) (17,769,266) 72,626,824 54,857,557

(1,237,500) (4,751,220) (5,988,720) (2,337,401) 74,964,225 72,626,824

11

4 5 5 5

9

The notes from 1 to 24 form an integral part of these financial statements.

12

Insurance House P.S.C. Financial Statements Notes to the financial statements For the year ended 31 December 2021 1

Legal status and activities

Insurance House P.S.C. (the “Company”) is a Public Joint - Stock company registered and incorporated in the Emirate of Abu Dhabi, United Arab Emirates and is engaged in providing all classes of non-life insurance solutions in accordance with UAE Federal Law No.6 of 2007. The Company was established on 8 December 2010 and commenced its operations on 10 April 2011. The Company performs its activities through its head office in Abu Dhabi and branches located in Al Samha, Dubai - Sheikh Zayed Road, Dubai – Business Bay, Sharjah, Al Mussafah, Mahawi and Motor World.

The Company's ordinary shares are listed on the Abu Dhabi Securities Exchange.

The registered office of the Company is P.O. Box 129921 Abu Dhabi, United Arab Emirates.

The Federal Decree-Law No. 26 of 2020 which amends certain provisions of Federal Law No. 2 of 2015, as amended, on Commercial Companies was issued on 27 September 2020 and the amendments came into effect on 2 January 2021, however, some of the amended articles refer to further executive regulations to be issued. The Company is in the process of reviewing the new provisions and will apply the requirements thereof no later than one year from the date on which the amendments came into effect.

Federal Decree Law No. 24 of 2020 which amends certain provisions of the UAE Federal Law No. 6 of 2007 on Establishment of Insurance Authority and Organization of its Operations was issued on 27 September 2020 and the amendments came into effect on 2 January 2021. Effective 2 January 2021, the Insurance Sector became under the supervision and authority of the CBUAE. Federal Law by Decree No. 32 of 2021 on Commercial Companies (the “New Companies Law”) was issued on September 20, 2021 with an effective date of January 2, 2022, and will entirely replace Federal Law No. 2 of 2015, as amended, on Commercial Companies, as amended. The Company has complied with the law and amended its Articles of Association based on the law.

The range of products and services offered by the company include but not limited to accidents and civil responsibility insurance, land, marine and air transportation, dangers insurance, health insurance, onshore and offshore oil and gas fields and facilities services.

2

General Information

2.1

Statement of compliance

These financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) promulgated by International Accounting Standards Board (IASB) and interpretations thereof issued by the International Financial Reporting Interpretation Committee and in compliance with the applicable requirements of U.A.E Federal Law No. (2) of 2015, as amended, relating to commercial companies, UAE Federal Law No. (6) of 2007 on the Establishment of the Insurance Authority and Organisation of the Insurance Operations, and Insurance Authority’s Board of Directors Decision No. (25) of 2014 pertinent to Financial Regulations for Insurance Companies.

2.2

Basis of preparation

These financial statements are for the year ended 31 December 2021 and are presented in Arab Emirate Dirham (AED), which is the functional and presentation currency of the Company.

The financial statements have been prepared on the historical cost basis except for investments carried at fair value through profit or loss and investments carried at fair value through other comprehensive income which are carried at fair value. They have been prepared under the assumption that the Company operates on a going concern basis.

As required by the Securities and Commodities Authority (“SCA”) notification dated 12 October 2008, accounting policies relating to investment securities have been disclosed in the financial statements.

13

Insurance House P.S.C. Financial Statements Notes to the financial statements (continued) For the year ended 31 December 2021 2

General information (continued)

2.3

Standards, interpretations and amendments to existing standards

Standards, interpretations and amendments to existing standards that are effective in 2021

In the current period, the Company has applied the following amendments to IFRSs issued by the International Accounting Standards Board (“IASB”) that are mandatorily effective for an accounting period that begins on or after 1 January 2021. The application of these amendments to IFRSs has not had any material impact on the amounts reported for the current and prior periods but may affect the accounting for the Company’s future transactions or arrangements.  COVID-19-related rent concessions beyond 30 June 2021 (Amendments to IFRS 16)  Interest Rate Benchmark Reform Phase 2 (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16) These amendments do not have a significant impact on these financial statements and therefore the disclosures have not been made.

Standards and interpretations in issue but not yet effective and has not been adopted early by the Company

The new standards and revised IFRSs not yet effective and have not been adopted early by the Company include:  IFRS 17 Insurance Contracts  Amendments to IFRS 17 Insurance Contracts (Amendments to IFRS 17 and IFRS 4)  Amendments to IFRS 3 - References to the Conceptual Framework  Proceeds before Intended Use (Amendments to IAS 16)  Onerous Contracts – Cost of Fulfilling a Contract (Amendments to IAS 37)  Annual Improvements to IFRS Standards 2018-2020 Cycle (Amendments to IFRS 1, IFRS 9, IFRS 16, IAS 41)  Classification of Liabilities as Current or Non-current (Amendments to IAS 1)  Deferred Tax related to Assets and Liabilities from a Single Transaction Management anticipates that these amendments will be adopted in the financial information in the initial period when they become mandatorily effective. The impact of these standards and amendments is currently being assessed by the management.

Standard number

Title

Effective date

IFRS 17

Insurance Contracts

1 January 2023

14

Insurance House P.S.C. Financial Statements Notes to the financial statements (continued) For the year ended 31 December 2021 2

General information (continued)

2.3

Standards, interpretations and amendments to existing standards (continued)

Standards and interpretations in issue but not yet effective and has not been adopted early by the Company (continued)

In May 2017, the IASB issued IFRS 17 Insurance Contracts (IFRS 17), a comprehensive new accounting standard for insurance contracts covering recognition and measurement, presentation and disclosure. Once effective, IFRS 17 will replace IFRS 4 Insurance Contracts (IFRS 4) that was issued in 2005. IFRS 17 applies to all types of insurance contracts (i.e. life, non-life, direct insurance and re-insurance), regardless of the type of entities that issue them, as well as to certain guarantees and financial instruments with discretionary participation features. A few scope exceptions will apply. The overall objective of IFRS 17 is to provide an accounting model for insurance contracts that is more useful and consistent for insurers. In contrast to the requirements in IFRS 4, which are largely based on grandfathering previous local accounting policies, IFRS 17 provides a comprehensive model for insurance contracts, covering all relevant accounting aspects.

The core of IFRS 17 is the general model, supplemented by:  A specific adaptation for contracts with direct participation features (the variable fee approach)  A simplified approach (the premium allocation approach) mainly for short-duration contracts.

IFRS 17 is effective for reporting periods beginning on or after 1 January 2023, with comparative figures required. Early application is permitted, provided the entity also applies IFRS 9 and IFRS 15 on or before the date if first applies IFRS 17. The Company plans to adopt the standard on the required effective date and is currently evaluating the expected impact.

3

Summary of significant accounting policies

3.1

Accounting convention

These financial statements have been prepared using the measurement basis specified by IFRS for each type of asset, liability, income and expense. The measurement bases are described in more detail in the accounting policies.

3.2

Property and equipment

Property and equipment are recorded at cost less accumulated depreciation and any impairment losses.

Depreciation is charged on a straight-line basis over the estimated useful lives of the property and equipment.

The rates of depreciation used are based on the following estimated useful lives of the assets: Years Computers and software Office equipment and decoration Motor vehicles Building

3–4 4 4 30

Material residual value estimates and estimates of useful life are updated as required, but at least annually.

Gains or losses arising on the disposal of property and equipment are determined as the difference between the disposal proceeds and the net carrying amount of the assets and are recognised in the statement of profit or loss.

15

Insurance House P.S.C. Financial Statements Statement of changes in equity (continued) For the year ended 31 December 2021 3

Summary of significant accounting policies (continued)

3.3

Premiums

Gross premiums written reflect amounts recognised during the year to policyholders or other insurers for insurance contracts, and exclude any fees and other amounts calculated based on premiums. These are recognised when the underwriting process is complete.

Gross premiums include any adjustments in respect to the business written in prior accounting periods.

The earned portion is recognised as income. Gross premiums are earned from the date of attachment of risk over the indemnity period and unearned premium is calculated using the basis below.

3.4

Unearned Premiums Reserve (UPR)

Unearned Premiums Reserve (UPR) represents that portion of premiums earned, gross of reinsurance, which relates to the period of insurance subsequent to the statement of financial position date and is mainly computed using a linear method based on the outstanding period from the date of statement of financial position up to the date of the maturity of the policy based on actuarial estimates obtained from an independent actuary in accordance with the Financial Regulations for Insurance Companies issued by the Insurance Authority, U.A.E. 3.5

Claims

Claims incurred comprise actual claims and other related costs paid and incurred in the year, and movement in outstanding claims. Claim handling costs are recognised at the time of registering the claims.

On account of uncertainties involved in non-motor claim recoveries, salvage and subrogation rights are recognised only at the time of actual recovery. For motor claim recoveries, salvage is accounted for at the time of registering the claims.

Claims under settlement reserve represents the estimated settlement values of all claims notified, but not settled at the statement of financial position date on the basis of individual case estimates. The reinsurers’ portion towards the above outstanding claims is classified as reinsurance contract assets and shown as current assets in the statement of financial position.

3.6

Incurred but not reported claims reserve (IBNR)

Incurred but Not Reported Claims Reserve is made at the statement of financial position date based on an actuarial estimate obtained from an independent actuary in accordance with the Financial Regulations for Insurance Companies issued by the Insurance Authority U.A.E. 3.7

Unallocated Loss Adjustment Expenses Reserve (ULAE)

Unallocated Loss Adjustment Expenses Reserve which cannot be allocated to specific claims, is made at the statement of financial position date based on actuarial estimates obtained from an independent actuary in accordance with the Financial Regulations for Insurance Companies issued by the Insurance Authority, U.A.E. 3.8

Unexpired Risk Reserve (URR)

Unexpired risk reserve represents the portion of the premium subsequent to the reporting date and where the premium is expected to be insufficient to cover anticipated claims, expenses and a reasonable profit margin.

16

Insurance House P.S.C. Financial Statements Notes to the financial statements (continued) For the year ended 31 December 2021 3

Summary of significant accounting policies (continued)

3.9

Liability adequacy test

All recognised insurance liabilities including provision for outstanding claims are subject to liability adequacy test at each reporting date. This involves comparison of current estimates of all contractual cash flows attached to these liabilities with their carrying amounts. Estimates of contractual cash flows include expected claim handling costs and recoveries from third parties. Any deficiency in carrying amounts is charged to the statement of profit or loss by establishing a provision for losses arising from the liability adequacy test.

3.10

Reinsurance premium

Ceded reinsurance premiums are accounted for in the same accounting periods in which the premiums for the related direct insurance are recorded and the unearned portion is calculated using a linear basis in accordance with reinsurance arrangements in place.

3.11

Reinsurance assets

Amounts recoverable under reinsurance contracts are assessed for impairment at each statement of financial position date. Such assets are deemed impaired if there is objective evidence, as a result of an event that occurred after its initial recognition, that the Company may not recover all amounts due and that the event has a reliably measurable impact on the amounts that the Company will receive from the reinsurer.

3.12

Financial instruments

a)

Recognition and derecognition

Financial assets and financial liabilities are recognised when the Company becomes a party to the contractual provisions of the financial instrument and are measured initially at fair value plus, for an item not at fair value through profit or loss, transactions costs that are directly attributable to its acquisition or issue. Regular way purchases and sales of financial assets are recognised on the date on which the Company commits to purchase or sell the asset i.e. the trade date. b)

Classification and initial measurement of financial assets

For the purposes of subsequent measurement, the Company classifies its financial assets into the following categories:

i)

Financial assets at amortised cost

Financial assets at amortised cost are those financial assets for which: - the Company’s business model is to hold them in order to collect contractual cash flows; and - the contractual terms give rise on specific dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

After initial recognition these are measured at amortised cost using the effective interest method, less provision for impairment. Discounting is omitted where the effect of discounting is immaterial.

These are included in current assets, except for maturities greater than 12 months after the end of the reporting period which are classified as non-current assets.

Financial assets at amortised cost comprise statutory deposits, cash and cash equivalents, due from related parties and most other receivables.

ii)

Financial assets at fair value through other comprehensive income (‘FVTOCI’)

Investments in equity securities are classified as FVTOCI. At initial recognition, the Company can make an irrevocable election (on an instrument-by-instrument basis) to designate investments in equity investments at FVTOCI. Designation at FVTOCI is not permitted if the equity investment is held for trading.

17

Insurance House P.S.C. Financial Statements Notes to the financial statements (continued) For the year ended 31 December 2021 3

Summary of significant accounting policies (continued)

3.12

Financial instruments (continued)

Fair value measurement

For investments traded in organised financial markets, fair value is determined by reference to stock exchange quoted prices at the close of business on the statement of financial position date. Investments in unquoted securities are measured at fair value, considering observable market inputs and unobservable financial data of investees.

Gains or losses on subsequent measurement

Gain or loss arising from change in fair value of investments at FVTOCI is recognised in other comprehensive income and reported within the fair value reserve for investments at FVTOCI within equity.

When the asset is disposed of, the cumulative gain or loss recognised in other comprehensive income is not reclassified from the equity reserve to statement of profit or loss , but is reclassified to retained earnings. b)

Classification and subsequent measurement of financial assets (continued)

iii)

Financial assets at fair value through profit or loss (‘FVTPL’)

Investments in equity instruments are classified as at FVTPL, unless the Company designates an investment that is not held for trading as at fair value through other comprehensive income (FVTOCI) on initial recognition.

Debt instruments that do not meet the amortised cost criteria are measured at FVTPL. In addition, debt instruments that meet the amortised cost criteria but are designated as at FVTPL are measured at FVTPL. A debt instrument may be designated as at FVTPL upon initial recognition if such designation eliminates or significantly reduces a measurement or recognition inconsistency that would arise from measuring assets or liabilities or recognising the gains and losses on them on different bases.

Debt instruments are reclassified from amortised cost to FVTPL when the business model is changed such that the amortised cost criteria are no longer met. Reclassification of debt instruments that are designated as at FVTPL on initial recognition is not allowed.

Financial assets at FVTPL are measured at fair value at the end of each reporting period, with any gains or losses arising on remeasurement recognised in the statement of profit or loss. Fair value is determined in the manner described in note 5. c)

Classification and subsequent measurement of financial liabilities

Financial liabilities comprise amounts due to related parties and most other payables.

Financial liabilities are measured subsequently at amortised cost using the effective interest method. d)

Impairment

The Company recognises loss allowances for expected credit losses (ECL) on the following financial instruments that are not measured at FVTPL:  financial assets that are debt instruments;  financial guarantee contracts issued;  loan commitments issued; and  No impairment loss is recognised on equity investments.

The Company measures loss allowances at an amount equal to lifetime ECL, except for those financial instruments on which credit risk has not increased significantly since their initial recognition, in which case 12-month ECL are measured. 12-month ECL are the portion of ECL that result from default events on a financial instrument that are possible within the 12 months after reporting date.

18

Insurance House P.S.C. Financial Statements Notes to the financial statements (continued) For the year ended 31 December 2021 3

Summary of significant accounting policies (continued)

3.12

Financial instruments (continued)

d)

Impairment (continued)

Measurement of ECL

ECL are probability-weighted estimate of credit losses. They are measured as follows:  financial assets that are not credit-impaired at the reporting date: as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Company expects to receive).  financial assets that are credit-impaired at the reporting date: as the difference between the gross carrying amount and the present value of estimated future cash flows;  undrawn loan commitments: as the present value of the difference between the contractual cash flows that are due to the Company if the commitment is drawn down and the cash flows that the Company expects to receive; and  financial guarantee contracts: the expected payments to reimburse the holder less any amounts that the Company expects to recover. e)

Offsetting financial instruments

Financial assets and liabilities are offset and the net amount reported in the statement of financial position only when there is a legally enforceable right to offset the recognised amounts and there is an intention to settle on a net basis, or to realise the asset and settle the liability simultaneously. f)

Derecognition

The requirements for derecognition of financial assets and liabilities are carried forward from IAS 39.

Financial assets are derecognised when the contractual rights to the cash flows from the financial asset expire, or when the financial asset and all substantial risks and rewards are transferred. A financial liability is derecognised when it is extinguished.

3.13

Receivables and payables related to insurance contracts

Receivables and payables are recognised when due. These include amounts due to and from insurance brokers, re-insurers and insurance contract holders.

If there is objective evidence that the insurance receivables are impaired, the Company reduces the carrying amount of the insurance receivables accordingly and realises the impairment loss in the statement of profit or loss.

19

Insurance House P.S.C. Financial Statements Notes to the financial statements (continued) For the year ended 31 December 2021 3

Summary of significant accounting policies (continued)

3.14

Employee benefits

Short-term employee benefits

The cost of short-term employee benefits (those payable within 12 months after the service is rendered such as paid vacation leave and bonuses) is recognised in the period in which the service is rendered.

Provision for employees’ end-of-service benefits

A provision for employees' end-of-service benefits is made for the full amount due to employees for their periods of service up to the reporting date in accordance with the U.A.E. Labour Law and is reported as separate line item under non-current liabilities.

The entitlement to end of service benefits is based upon the employees’ salary and length of service, subject to the completion of a minimum service period as specified in the U.A.E. Labour Law. The expected costs of these benefits are accrued over the period of employment.

3.15

Foreign currency transactions

Transactions in foreign currencies are translated to AED at the foreign exchange rate ruling at the date of the transactions. Monetary assets and liabilities denominated in foreign currencies at the statement of financial position date are translated to AED at the foreign exchange rate ruling at that date. Foreign exchange differences arising on translation are recognised in the statement of profit or loss.

Non-monetary items are not retranslated at year-end and are measured at historical cost (translated using the exchange rates at the transaction date), except for non-monetary items measured at fair value which are translated using the exchange rates at the date when fair value was determined.

3.16

Provisions, contingent liabilities and contingent assets

Provisions are recognised when present obligations as a result of a past event will probably lead to an outflow of economic resources from the Company and amounts can be estimated reliably. Timing or amount of the outflow may still be uncertain. A present obligation arises from the presence of a legal or constructive commitment that has resulted from past events.

Provisions are measured at the estimated expenditure required to settle the present obligation, based on the most reliable evidence available at the reporting date, including the risks and uncertainties associated with the present obligation. Where there are a number of similar obligations, the likelihood that an outflow will be required in settlement is determined by considering the class of obligations as a whole. Provisions are discounted to their present values, where the time value of money is material.

Any reimbursement that the Company can be virtually certain to collect from a third party with respect to the obligation is recognised as a separate asset. However, this asset may not exceed the amount of the related provision.

All provisions are reviewed at each reporting date and adjusted to reflect the current best estimate.

In those cases where the possible outflow of economic resources as a result of present obligations is considered improbable or remote, no liability is recognised, unless it was assumed in the course of a business combination.

Possible inflows of economic benefits to the Company that do not yet meet the recognition criteria of an asset are considered contingent assets.

20

Insurance House P.S.C. Financial Statements Notes to the financial statements (continued) For the year ended 31 December 2021 3

Summary of significant accounting policies (continued)

3.17

Equity, reserves and dividend payments

Share capital represents the nominal value of shares that have been issued.

Other details for reserves are mentioned in note 10 to the financial statements.

Accumulated losses include all current and prior period retained profits or losses.

Dividend payable to equity shareholders is included in other liabilities only when the dividend has been approved in a general assembly meeting prior to the reporting date.

3.18

Leases

The Company as a Lessee For any new contracts entered into on or after 1 January 2019, the Company considers whether a contract is, or contains a lease. A lease is defined as ‘a contract, or part of a contract, that conveys the right to use an asset (the underlying asset) for a period of time in exchange for consideration’.

To apply this definition the Company assesses whether the contract meets three key evaluations which are whether: • • •

the contract contains an identified asset, which is either explicitly identified in the contract or implicitly specified by being identified at the time the asset is made available to the Company; the Company has the right to obtain substantially all of the economic benefits from use of the identified asset throughout the period of use, considering its rights within the defined scope of the contract; and the Company has the right to direct the use of the identified asset throughout the period of use. The Company assess whether it has the right to direct ‘how and for what purpose’ the asset is used throughout the period of use.

Measurement and recognition of leases as a lessee At lease commencement date, the Company recognises a right-of-use asset and a lease liability on the statement of financial position. The right-of-use asset is measured at cost, which is made up of the initial measurement of the lease liability, any initial direct costs incurred by the Company, an estimate of any costs to dismantle and remove the asset at the end of the lease, and any lease payments made in advance of the lease commencement date (net of any incentives received).

The Company depreciates the right-of-use assets on a straight-line basis from the lease commencement date to the earlier of the end of the useful life of the right-of-use asset or the end of the lease term. The Company also assesses the right-of-use asset for impairment when such indicators exist.

At the commencement date, the Company measures the lease liability at the present value of the lease payments unpaid at that date, discounted using the interest rate implicit in the lease if that rate is readily available or the Company’s incremental borrowing rate.

Lease payments included in the measurement of the lease liability are made up of fixed payments (including in substance fixed), variable payments based on an index or rate, amounts expected to be payable under a residual value guarantee and payments arising from options reasonably certain to be exercised.

Subsequent to initial measurement, the liability will be reduced for payments made and increased for interest. It is remeasured to reflect any reassessment or modification, or if there are changes in in-substance fixed payments.

When the lease liability is remeasured, the corresponding adjustment is reflected in the right-of-use asset, or profit and loss if the right-of-use asset is already reduced to zero.

21

Insurance House P.S.C. Financial Statements Notes to the financial statements (continued) For the year ended 31 December 2021 3

Summary of significant accounting policies (continued)

3.18

Leases (continued)

The Company has elected to account for short-term leases and leases of low-value assets using the practical expedients. Instead of recognising a right-of-use asset and lease liability, the payments in relation to these are recognised as an expense in statement of profit or loss on a straight-line basis over the lease term.

3.19

Cash and cash equivalents

Cash and cash equivalents comprise cash balances, call deposits, current accounts and fixed deposits which have original maturities of less than 3 months and are free from lien.

3.20

Impairment of non-financial assets

The carrying amounts of the Company’s non-financial assets are reviewed at each statement of financial position date or whenever there is any indication of impairment. If any such indication exists, the asset’s recoverable amount is estimated. An impairment loss is recognised whenever the carrying amount of an asset or its cash-generating unit exceeds its recoverable amount. The impairment losses are recognised in the statement of profit or loss. An impairment charge is reversed if the cash-generating unit's recoverable amount exceeds its carrying amount.

3.21

Segment reporting

Under IFRS 8 “Operating Segments”, reported segments’ profits are based on internal management reporting information that is regularly reviewed by the chief operating decision maker. The measurement policies used by the Company for segment reporting under IFRS 8 are the same as those used in its financial statements.

3.22

Insurance Contracts

Insurance contract is an agreement whereby one party called the insurer undertakes, for a consideration paid by the other party called the insured, promises to pay money, or its equivalent or to do some act valuable to the latter, upon happening of a loss, liability or disability arising from an unknown or contingent event.

Insurance contracts are those contracts that transfer significant insurance risk. Such risk includes the possibility of having to pay benefits on the occurrence of an insured event. The Company may also transfer insurance risk in insurance contracts through its reinsurance agreements to hedge a greater possibility of claims occurring than expected.

Once a contract has been classified as an insurance contract, it remains an insurance contract for the remainder of its lifetime, even if the insurance risk reduces significantly during this period, unless all rights and obligations are extinguished or have expired.

3.23

General and administrative expenses

Costs and expenses are recognized when decrease in future economic benefits related to a decrease in an asset or an increase of a liability has arisen that can be measured reliably.

22

Insurance House P.S.C. Financial Statements Notes to the financial statements (continued) For the year ended 31 December 2021 3

Summary of significant accounting policies (continued)

3.24

Critical accounting estimates and judgements in applying accounting policies

Information about estimates and assumptions that have the most significant effect on recognition and measurement of assets, liabilities, income and expenses is provided below. Actual results may be substantially different.

Claims under settlement reserve, IBNR, ULAE, URR and UPR The estimation of the ultimate liability (claims under settlement reserve, IBNR, ULAE and URR) arising from claims and UPR made under insurance contracts is the Company’s most critical accounting estimate.

These estimates are continually reviewed and updated, and adjustments resulting from this review are reflected in the statement of profit or loss. The process relies upon the basic assumption that past experience, adjusted for the effect of current developments and likely trends (including actuarial calculations), is an appropriate basis for predicting future events.

Fair value of financial instruments Where the fair value of financial assets and financial liabilities recorded in the statement of financial position cannot be derived from active markets, their fair value is determined using valuation techniques including the discounted cash flow model. The inputs to these models are taken from observable markets where possible, but where this is not feasible, a degree of judgement is required in establishing fair values. The judgements include considerations of inputs such as liquidity risk, credit risk and volatility. Changes in assumptions about these factors could affect the reported fair value of financial instruments.

Inputs, assumptions and techniques used for ECL calculation – IFRS 9 Methodology Key concepts in IFRS 9 that have the most significant impact and require a high level of judgment, as considered by the Company while determining the impact assessment, are: The assessment of a significant increase in credit risk is done on a relative basis. To assess whether the credit risk on a financial asset has increased significantly since origination, the Company compares the risk of default occurring over the expected life of the financial asset at the reporting date to the corresponding risk of default at origination, using key risk indicators that are used in the Company’s existing risk management processes.

The measurement of expected credit losses for each stage and the assessment of significant increases in credit risk must consider information about past events and current conditions as well as reasonable and supportable forecasts of future events and economic conditions. The estimation and application of forwardlooking information will require significant judgment.

The definition of default used in the measurement of expected credit losses and the assessment to determine movement between stages will be consistent with the definition of default used for internal credit risk management purposes. IFRS 9 does not define default, but contains a rebuttable presumption that default has occurred when an exposure is greater than 90 days past due.

When measuring ECL, the Company must consider the maximum contractual period over which the Company is exposed to credit risk. All contractual terms should be considered when determining the expected life, including prepayment options and extension and rollover options. For certain revolving credit facilities that do not have a fixed maturity, the expected life is estimated based on the period over which the Company is exposed to credit risk and where the credit losses would not be mitigated by management action.

23

Insurance House P.S.C. Financial Statements Notes to the financial statements (continued) For the year ended 31 December 2021 4

Property and equipment

Cost At 1 January 2020 Additions during the year 2020 Reclassification during the year 2020 Transfers during the year 2020 At 31 December 2020 Additions during the year 2021 At 31 December 2021

Land AED

Office equipment Building and decoration AED AED

Computers and software AED

Motor vehicles AED

Capital work in progress AED

Total AED

10,390,000 10,390,000 10,390,000

28,571,039 28,571,039 28,571,039

6,007,958 83,971 6,091,929 19,446 6,111,375

3,190,793 221,517 (106,490) 3,305,820 64,841 3,370,661

302,143 302,143 302,143

3,682,127 1,197,513 106,490 4,986,130 1,480,523 6,466,653

48,461,933 3,987,615 1,197,513 53,647,061 1,564,810 55,211,871

-

798,423 947,585 1,746,008 952,368 2,698,376

4,746,747 573,332 5,320,079 494,769 5,814,848

2,695,707 247,097 2,942,804 192,276 3,135,080

213,013 75,441 288,454 13,296 301,750

-

8,453,890 1,843,455 10,297,345 1,652,710 11,950,055

Carrying amount As at 31 December 2021

10,390,000

25,872,663

296,527

235,581

393

6,466,653

43,261,817

As at 31 December 2020

10,390,000

26,825,031

771,850

363,016

13,689

4,986,130

43,349,716

Accumulated Depreciation At 1 January 2020 Charge for the year 2020 At 31 December 2020 Charge for the year 2021 At 31 December 2021

24

Insurance House P.S.C. Financial Statements Notes to the financial statements (continued) For the year ended 31 December 2021 5

Investments in financial assets

2021 AED

2020 AED

41,335,714 3,011,000 6,950,000 51,296,714

34,891,017 7,323,319 6,950,000 49,164,336

7,249,031 5,000,000 12,249,031

5,554,455 5,000,000 10,554,455

Investments carried at FVTOCI Fair value at 1 January Disposals Change in fair value Fair value at the end of the reporting period

2021 AED

2020 AED

49,164,336 (8,105,560) 10,237,938 51,296,714

59,996,256 (11,072,607) 240,687 49,164,336

Investments carried at FVTPL Fair value at 1 January Purchases Disposals Change in fair value taken to profit and loss Fair value at the end of the reporting period

10,554,455 3,152,212 (2,133,023) 675,387 12,249,031

13,607,267 5,997,765 (9,432,264) 381,687 10,554,455

2021 AED

2020 AED

46,841,483 3,011,000 5,000,000 6,950,000 1,743,262 63,545,745

39,388,459 7,323,319 5,000,000 6,950,000 1,057,013 59,718,791

Investments carried at FVTOCI Quoted equity securities Quoted Tier 1 perpetual securities Unquoted Tier 1 perpetual securities Investments carried at FVTPL Quoted equity securities Unquoted debt securities

The movement in the investments in financial assets is as follows:

The geographical distribution of investments is as follows:

Quoted UAE equity securities Quoted outside UAE securities Unquoted UAE securities Unquoted UAE Tier 1 securities Quoted outside UAE equity securities

25

Insurance House P.S.C. Financial Statements Notes to the financial statements (continued) For the year ended 31 December 2021 5

Investments in financial assets (continued)

Management considers that the fair values of financial assets and financial liabilities that are not measured at fair value approximates to their carrying amounts as stated in the financial statements and are classified as level 3 in accordance with the IFRS 13 hierarchy.

The following table provides an analysis of financial instruments that are measured subsequent to initial recognition at fair value into Levels 1 to 3 based on the degree to which the fair value is observable.   

Level 1 – fair value measurements derived from quoted prices (unadjusted) in active markets for identical assets or liabilities; Level 2 – fair value measurements derived from inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices); and Level 3 – fair value measurements derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data (unobservable inputs).

Note

Level 1 AED

Level 2 AED

Level 3 AED

Total AED

(a)

41,335,714 3,011,000 44,346,714

-

6,950,000 6,950,000

41,335,714 3,011,000 6,950,000 51,296,714

(a)

7,249,031 7,249,031

-

5,000,000 5,000,000

7,249,031 5,000,000 12,249,031

(a)

34,891,017 7,323,319 42,214,336

-

6,950,000 6,950,000

34,891,017 7,323,319 6,950,000 49,164,336

(a)

5,554,455 5,554,455

-

5,000,000 5,000,000

5,554,455 5,000,000 10,554,455

31 December 2021 Investments at FVTOCI Investment in quoted securities Quoted Tier 1 perpetual securities Unquoted Tier 1 perpetual securities Investments at FVTPL Investment in quoted equity securities Unquoted Tier 1 perpetual securities 31 December 2020 Investments at FVTOCI Investment in quoted securities Quoted Tier 1 perpetual securities Unquoted Tier 1 perpetual securities Investments at FVTPL Investment in quoted equity securities Unquoted Tier 1 perpetual securities

(a) Fair values have been determined by reference to the quoted prices at the reporting date.

During the year, there were no transfers between Level 1 and Level 2 fair value measurement and no transfers into or out of Level 3 fair value measurements.

26

Insurance House P.S.C. Financial Statements Notes to the financial statements (continued) For the year ended 31 December 2021 6

Statutory deposit

In accordance with the requirement of Federal Law No. 6 of 2007, concerning Insurance Companies and Agents, the Company maintains a bank deposit amounting to AED 6,000,000 as of 31 December 2021 (31 December 2019: AED 6,000,000) and it cannot be utilized without the consent of the UAE Insurance Regulatory Authority.

7

Premium and insurance balances receivable

Due from policyholders Due from brokers and agencies Due from insurance and reinsurance companies Due from related parties (Note 18) Expected credit loss Refundable deposits and other advances Premium and insurance balances receivables – net

2021 AED

2020 AED

41,841,082 12,686,644 52,914,469 2,492,527 109,934,722 (9,110,170) 100,824,552 347,524 101,172,076

42,202,901 14,310,160 20,979,076 891,043 78,383,180 (8,025,259) 70,357,921 81,350 70,439,271

Inside UAE:

In accordance with the Board of Directors’ Decision Number 25 of 2014 pertinent to the Financial Regulations for Insurance Companies, the company has categorized the insurance receivables as follows:

Due from policyholders Due from brokers and agencies Due from insurance and reinsurance companies Total

2021 AED

2020 AED

41,841,082 12,686,644 2,965,005 57,492,731

42,202,901 14,310,160 1,376,272 57,889,333

2021 AED

2020 AED

19,378,861 19,804,174 4,125,682 3,760,822 1,844,593 8,578,599 57,492,731

2,863,520 10,783,318 15,840,747 15,568,809 6,647,949 6,184,990 57,889,333

The ageing for the insurance receivables inside UAE is as follows:

0 – 30 Days 31 - 90 days 91 - 180 days 181 - 270 days 271 - 360 days More than 360 days Total

27

Insurance House P.S.C. Financial Statements Notes to the financial statements (continued) For the year ended 31 December 2021 7

Premium and insurance balances receivables (continued)

Outside UAE:

Due from insurance and reinsurance companies

2021 AED

2020 AED

49,949,464

19,602,804

2021 AED

2020 AED

49,949,464

19,602,804

2021 AED

2020 AED

(8,025,259) (1,084,911) (9,110,170)

(7,123,244) (902,015) (8,025,259)

2021 AED

2020 AED

15,990,149 5,222,571 2,353,778 957,400 724,371 294,241 25,542,510

15,382,115 5,597,847 2,353,778 1,230,826 636,100 294,240 25,494,906

The ageing for the insurance receivables outside UAE is as follows:

31-90 days Expected credit loss

Beginning balance Charge during the year Ending balance 8

Other receivables and prepayments

Deferred acquisition costs Prepayments Rent receivable Accrued interest income Guarantee deposits Other advances

28

Insurance House P.S.C. Financial Statements Notes to the financial statements (continued) For the year ended 31 December 2021 9

Cash and cash equivalents

Cash on hand Cash at banks - current accounts (i) Cash at bank - call account (i) Fixed deposits (ii) Cash and bank balances Less: fixed deposits with an original maturity of more than three months Cash and cash equivalents

2021 AED

2020 AED

5,000 19,018,735 25,588,862 24,244,960 68,857,557

5,000 3,763,352 44,858,472 40,000,000 88,626,824

(14,000,000) 54,857,557

(16,000,000) 72,626,824

i.

Cash at banks includes current accounts and call account balances amounting to AED 17,844,461 as of 31 December 2021 held with two financial institutions which are related parties (call account balances are interest bearing) (31 December 2020: AED 7,974,917).

ii.

Bank fixed deposits as at 31 December 2021 amounting to AED 24,244,960 (31 December 2020: AED 40,000,000) carry interest rate of 2.15% p.a. to 2.25% p.a. (31 December 2020: 1.8% p.a. to 3.25% p.a.).

10

Capital and reserves

Share capital The share capital of the company as per Articles of Association is AED 120,000,000 divided into 120,000,000 shares of AED 1 par value per share. As at 31 December 2021 and 31 December 2020, the Company has 118,780,500 shares outstanding and issued of AED 1 par value per share.

Tier 1 capital On 14 January 2019, the Company’s Board of Directors approved the issuance of Tier 1 perpetual bonds non-convertible into shares amounting to AED 15,000,000 for the purpose of strengthening the Company’s capital adequacy and assets and to support its financial position to achieve the Company’s growth strategy and to be compatible with the instructions of the Insurance Authority.

Legal reserve In accordance with the UAE Federal Law No. (2) of 2015, as amended, concerning Commercial Companies and the Company’s Articles of Association, 10% of profit is to be transferred to non-distributable legal reserve until the balance of the legal reserve equals 50% of the Company’s paid up share capital. This reserve is not available for dividend distribution.

Reinsurance reserve In accordance with Insurance Authority’s Board of Directors’ Decision No. 23, Article 34, an amount of AED 422,793 was transferred from retained earnings to reinsurance reserve. The reserve is not available for distribution, and will not be disposed of without prior approval from Insurance Authority.

Dividend declaration On April 12, 2021, the shareholders approved in the Annual General Meeting the declaration of dividends at a rate of 4% of the share capital.

29

Insurance House P.S.C. Financial Statements Notes to the financial statements (continued) For the year ended 31 December 2021 11

Provision for employees’ end-of-service benefits

Balance as at 1 January Charges during the year Benefits paid Balance at the end of the year 12

2021 AED

2020 AED

3,252,942 420,674 (790,600) 2,883,016

2,777,662 603,272 (127,992) 3,252,942

2021 AED

2020 AED

59,787,553 9,602,688 69,390,241

53,111,326 6,875,370 59,986,696

Insurance and other payables

Payables-inside UAE Payables-outside UAE

In accordance with the Board of Directors’ Decision Number 25 of 2014 pertinent to the Financial Regulations for Insurance Companies, the Company has categorized the insurance payables as follows: Inside UAE:

Due to insurance and reinsurance companies Due to brokers and agents Due to policyholders VAT output tax payable (Net) Unearned commission on premium ceded Related party payables (Note 18) Claims payable Due to reinsurance companies – inside UAE Other accrued expenses

2021 AED

2020 AED

24,803,420 7,292,919 6,273,082 18,208 3,021,801 8,900,000 5,806,174 541,774 3,130,175 59,787,553

24,614,443 4,528,352 4,058,779 37,048 2,734,566 5,773,409 5,313,021 514,942 5,536,766 53,111,326

2021 AED

2020 AED

5,910,609 3,692,079 9,602,688

5,493,611 1,381,759 6,875,370

Outside UAE:

Funds held for reinsurers Due to insurance and reinsurance companies

30

Insurance House P.S.C. Financial Statements Notes to the financial statements (continued) For the year ended 31 December 2021 13

Technical provisions

Insurance liabilities – gross Unearned premiums reserve Claims under settlement reserves Incurred but not reported claims reserve Unexpired risk reserve Unallocated loss adjustment expenses reserve

Reinsurance share of outstanding claims Unearned premiums reserve Claims under settlement reserves Incurred but not reported claims reserve

Insurance liabilities – net Unearned premiums reserve Claims under settlement reserves Incurred but not reported claims reserve Unexpired risk reserve Unallocated loss adjustment expenses reserve

14

2021 AED

2020 AED

81,376,612 51,604,277 28,869,141 252,338 2,256,961 164,359,329

79,368,272 35,513,092 20,133,725 1,549,066 136,564,155

39,580,062 30,655,061 7,043,918 77,279,041

25,897,275 15,199,690 1,126,871 42,223,836

41,796,550 20,949,216 21,825,223 252,338 2,256,961 87,080,288

53,470,997 20,313,402 19,006,854 1,549,066 94,340,319

2021 AED

2020 AED

1,580,592 1,430,018 938,335

2,535,036 1,454,221 1,438,780

428,993

1,004,665

675,387 5,053,325

381,687 6,814,389

Income from investments

Dividend income on investment in financial assets Interest income on fixed deposits and call account (net) Interest from fixed income securities Net realised gain from sale of investments carried at FVTPL Change in fair value of investments carried at FVTPL (Note 5)

31

Insurance House P.S.C. Financial Statements Notes to the financial statements (continued) For the year ended 31 December 2021 15

General and administrative expenses

Salaries and related benefits Management and consultancy fees Depreciation of property and equipment (Note 4) Government fees Expected credit loss Telephone and postage Bank charges Other general expenses

2021 AED

2020 AED

22,707,021 7,400,000 1,652,709 1,816,549 1,124,458 741,804 81,507 6,490,836 42,014,884

25,758,895 5,772,447 1,843,455 1,722,228 1,022,416 779,765 99,783 5,952,598 42,951,587

Expected credit loss (ECL) consists of ECL against premium and insurance balances receivable and debt investments carried at FVTOCI amounting to AED 1,084,911 and AED 39,547 respectively.

16

Earnings per share – Basic and diluted

Earnings per share are calculated by dividing the profit for the year by the weighted average number of ordinary shares outstanding during the year as follows: Earnings (AED): Net profit for the year Number of shares: Weighted average number of ordinary shares for the purpose of earnings per share Earnings per share (AED): Basic and diluted

2021

2020

9,519,956

10,885,879

118,780,500

118,780,500

0.08

0.09

The Company does not have potentially diluted shares and accordingly, diluted earnings per share equals basic earnings per share.

17

Risk management

The Company monitors and manages the financial risks relating to its business and operations. These risks include insurance risk, capital risk, credit risk, interest rate risk, market risk, foreign currency risk and liquidity risk.

The Company seeks to minimize the effects of these risks by diversifying the sources of its capital. It maintains timely reports about its risk management function and monitors risks and policies implemented to mitigate risk exposures.

32

Insurance House P.S.C. Financial Statements Notes to the financial statements (continued) For the year ended 31 December 2021 17

Risk management (continued)

Insurance risk The risk under any one insurance contract is the possibility that the insured event occurs and the uncertainty of the amount of the resulting claim. By the nature of an insurance contract, this risk is random and therefore unpredictable.

For a portfolio of insurance contracts where the theory of probability is applied to pricing and provisioning, the principal risk that the company faces under its insurance contracts is that the actual claims and benefit payments exceed the estimated amount of the insurance liabilities. This could occur because the frequency or severity of claims and benefits are greater that estimated. Insurance events are random and the actual number and amount of claims and benefits will vary from year to year from the estimate established using statistical techniques.

Experience shows that the larger the portfolio of similar insurance contracts, the smaller the relative variability about the expected outcome will be. In addition, a more diversified portfolio is less likely to be affected across the board by a change in any subset of the portfolio. The company has developed its insurance underwriting strategy to diversify the type of insurance risks accepted and within each of these categories to achieve a sufficiently large population of risks to reduce the variability of the expected outcome.

The Company manages risks through its underwriting strategy, adequate reinsurance arrangements and proactive claims handling. The underwriting strategy attempts to ensure that the underwritten risks are well diversified in terms of type and amount of risk, industry and geography. Underwriting limits are in place to enforce appropriate risk selection criteria.

Capital risk The Company's objectives when managing capital are:   

To comply with the insurance capital requirements required by UAE Federal Law No. 6 of 2007 concerning the formation of Insurance Authority of UAE. To safeguard the company's ability to continue as a going concern so that it can continue to provide returns for shareholders and benefits for other stakeholders.

To provide an adequate return to shareholders by pricing insurance contracts commensurately with the level of risk.

In UAE, the local insurance regulator specifies the minimum amount and type of capital that must be held by the company in relation to its insurance liabilities. The minimum required capital (presented in the table below) must be maintained at all times throughout the year. The Company is subject to local insurance solvency regulations with which it has complied with during the year.

The table below summarizes the minimum regulatory capital of the Company and the total capital held.

2021 AED

2020 AED

Total capital and reserves

149,026,160

136,049,551

Minimum regulatory capital

100,000,000

100,000,000

33

Insurance House P.S.C. Financial Statements Notes to the financial statements (continued) For the year ended 31 December 2021 17

Risk management (continued)

Credit risk Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the company.

Key areas where the company is exposed to credit risk are:  Re-insurers' share of insurance liabilities.  Amounts due from reinsurers in respect of claims already paid.  Amounts due from insurance contract holders.  Amounts due from insurance intermediaries.  Amounts due from banks for its balances and fixed deposits.

The Company has adopted a policy of only dealing with creditworthy counterparties as a means of mitigating the risk of financial loss from defaults. The Company's exposure and the credit ratings of its counterparties are continuously monitored, and the aggregate value of transactions concluded is spread amongst approved counterparties. Credit exposure is controlled by counter party limits that are reviewed and approved by the management annually.

Re-insurance is used to manage insurance risk. This does not, however, discharge the company's liability as primary insurer. If a re-insurer fails to pay a claim for any reason, the company remains liable for the payment to the policy holder. The creditworthiness of re-insurers is considered on an annual basis by reviewing their financial strength prior to finalization of any contract.

The Company maintains record of the payment history for significant contract holders with whom it conducts regular business. The exposure to individual counterparties is also managed by other mechanisms, such as the right of offset where counterparties are both debtors and creditors of the Company.

Management information reported to the company includes details of provisions for impairment on insurance receivables and subsequent write offs. Exposures to individual policy holders and groups of policy holders are collected within the ongoing monitoring of the controls. Where there exists significant exposure to individual policy holders, or homogenous groups of policy holders, a financial analysis equivalent to that conducted for re-insurers is carried out by the Company.

The carrying amount of financial assets recorded in the financial statements, which is net of expected credit loss, represents the Company's maximum exposure to credit risk for such receivables and liquid funds.

Interest rate risk Interest rate risk is the risk that the value of a financial instrument will fluctuate due to changes in market interest rate. The Company is exposed to interest rate risk on call account, fixed deposits with bank and financial assets such as bonds. The interest rates are subject to periodic revisions.

Market risk Market prices risk is the risk that the value of a financial instrument will fluctuate as a result of changes in market prices, whether those changes are caused by factors specific to the individual instrument or its issue or factors affecting all instruments traded in the market.

Foreign currency risk The Company undertakes certain transactions denominated in foreign currencies, which imposes sort of risk due to fluctuations in exchange rates during the year. The UAE Dirham is effectively pegged to the US Dollar, thus foreign currency risk occurs only in respect of other currencies. The company maintains policies and procedures to manage the exchange rate risk exposure.

34

Insurance House P.S.C. Financial Statements Notes to the financial statements (continued) For the year ended 31 December 2021 17

Risk management (continued)

Liquidity risk The Company's Board of Directors adopted an appropriate liquidity risk management framework as the responsibility of liquidity risk management rests with the Board of Directors.

The following table shows the maturity dates of Company's financial assets and liabilities as at 31 December 2021.

Financial assets Interest bearing Non-interest bearing

Financial liabilities Non-interest bearing

Less than 1 year AED

More than 1 year AED

Total AED

68,855,827 231,367,382 300,223,209

20,961,000 20,961,000

89,816,827 231,367,382 321,184,209

117,954,508

-

117,954,508

The following table shows the maturity dates of Company's financial assets and liabilities as at 31 December 2020.

Less than 1 year AED

More than 1 year AED

Total AED

88,621,824 151,443,642 240,065,466

25,273,319 6,184,881 31,458,200

113,895,143 157,628,523 271,523,666

92,728,174

-

92,728,174

Financial assets Interest bearing Non-interest bearing

Financial liabilities Non-interest bearing

35

Insurance House P.S.C. Financial Statements Notes to the financial statements (continued) For the year ended 31 December 2021 18

Related parties

Related parties comprise the major Shareholders, the Board of Directors and key management personnel of the Company and those entities in which they have the ability to control or exercise significant influence in financial and operation decisions. The transactions with these related parties are primarily financing in nature as follows: 2021 AED

2020 AED

Finance House PJSC

2,077,408

816,813

Finance House LLC Abdul Hamid Umer Taylor Finance House Securities LLC

253,390 161,728 2,492,526

72,390 1,840 891,043

Finance House PJSC

7,500,000

5,200,000

FH Capital P.S.C Finance House Securities LLC

1,400,000 -

572,447 962

Premium and insurance balances receivables

Shareholder Others

Insurance and other payables

Shareholder Others

8,900,000

5,773,409

Investments

Shareholder Finance House PJSC – Sukuks Finance House PJSC – Quoted investments in equity

6,950,000 -

6,950,000 4,157,360

Finance House Securities LLC – Commercial papers

5,000,000 11,950,000

5,000,000 16,107,360

Cash at bank - call account Cash at banks - current accounts

17,723,273 1,730

7,211,257 94,687

Cash at banks - current accounts

119,458 17,844,461

668,973 7,974,917

2,000,000 500,000 2,500,000

2,000,000 500,000 2,500,000

Others

Cash and cash equivalents

Shareholder Others

Tier 1 capital

Others

Abdul Hamid Umer Taylor Abdulmajeed Al Fahim

Finance House P.J.S.C is one of the major shareholders of the company as of 31 December 2021. FH Capital P.S.C, Finance House Securities L.L.C and Finance House LLC are subsidiaries of Finance House P.J.S.C.

36

Insurance House P.S.C. Financial Statements Notes to the financial statements (continued) For the year ended 31 December 2021 18

Related parties (continued)

The Company, in the normal course of business, collects premiums from and settles claims of other businesses that fall within the definition of related parties as contained in IFRS. The following are the details of significant transactions with related parties: Finance House PJSC Management fee Gross premiums written Interest on fixed deposits Fixed deposits placed Fixed deposits redeemed

2021 AED

2020 AED

6,000,000 4,213,045 651,044 73,000,000 79,000,000

5,200,000 4,007,808 89,000,000 69,000,000

Finance House Securities LLC Disposal of shares Purchase of shares Interest on investment in commercial paper Gross premiums written Fixed deposits placed Fixed deposits redeemed

6,420,016 3,152,212 204,308 337,049 10,000,000 20,000,000

14,086,596 2,997,765 137,271 300,433 30,000,000 20,000,000

Finance House LLC Interest on investment in sukuks Interest on Wakala fixed deposit Gross premium written

388,475 189,514 378,209

521,250 423,028 171,170

FH Capital Consultancy fees

500,000

572,447

Board of directors Remuneration

856,796

1,450,000

Gross premiums written Mohamed Abdulla Jumaa Al Qubaisi Finance House LLC

378,209

134,354 171,170

37

Insurance House P.S.C. Financial Statements Notes to the financial statements (continued) For the year ended 31 December 2021 19

Segment information

The Company has two reportable segments, as described below, which are the Company’s strategic business units. The business units are managed separately because they require different approach technology and marketing strategies. For each of the strategic business units, the Chief Operating Decision Maker reviews internal management reports on at least a quarterly basis.

The following summary describes the two main business segments:  

Underwriting of general insurance business – incorporating all classes of general insurance such as fire, marine, motor, medical, general accident and miscellaneous.

Investments – incorporating investments in marketable equity securities and investment funds, development bonds, term deposits with banks and other securities.

Primary segment information - business segment 31 December 2021 AED Underwriting Investments Segment revenue

207,314,824 46,481,515

Segment result Unallocated expense, net

5,053,325 5,053,325

31 December 2020 AED Total Underwriting Investments 6,814,389 6,814,389

(42,014,882)

Net profit for the year

a)

217,371,70 4 47,004,762

212,368,149 51,534,840

Total

224,186,093 53,819,151 (42,933,272)

9,519,956

10,885,879

The following is an analysis of the Company’s assets, liabilities and equity by business segment: 31 December 2021 AED Underwriting Investments

Segment assets Unallocated assets

235,823,208

Total

98,120,495

333,943,703 44,612,597 378,556,300

176,992,785

110,233,735

287,226,520 48,626,824 335,853,344

14,271,093

375,673,284

332,579,541

20,861

332,600,402

Total assets Segment liabilities and equity 361,402,191 Unallocated liabilities and equity Total liabilities and equity

31 December 2020 AED Total Underwriting Investments

2,883,016 378,556,300

38

3,252,942 335,853,344

Insurance House P.S.C. Financial Statements Notes to the financial statements (continued) For the year ended 31 December 2021 19

Segment information (continued)

b)

Secondary segment information – revenue from underwriting departments

The following is an analysis of the Company’s gross written premiums classified by major underwriting department.

Motor Medical Commercial

2021 AED

2020 AED

69,446,754 101,236,908 36,631,162 207,314,824

85,767,211 97,478,737 34,125,756 217,371,704

There were no transactions between the business segments during the year.

20

Commitments and contingencies

The Company’s bankers have issued in the normal course of business letters of guarantee in favor of third parties amounting to AED 6.6 million (31 December 2020: AED 6.6 million).

21

Post reporting date events

On 31 January 2022, the UAE Ministry of Finance announced the introduction of a 9% federal corporate tax rate effective for fiscal years commencing on or after 1 June 2023. There are no implications to the financial and reporting period ended 31 December 2021. Management is in the process of evaluating the consequences to the financial information / statements and will communicate the conclusion of their evaluation at an appropriate future time.

There have been no other events subsequent to the statement of financial position date that would significantly affect the amounts reported in the financial statements as at and for the period ended 31 December 2021.

22

General

The figures in the financial statements are rounded to the nearest Dirham of United Arab Emirates.

23

Approval of financial statements

The financial statements were approved and authorized for issue by the Board of Directors on 10 February 2022.

24

Impact of COVID-19 on the Company’s operations

The economic condition due to global outbreak of COVID-19 have adversely affected businesses worldwide during the year. The Company is also impacted due to lower revenue and delay in collecting premium. Investment income which was negatively affected during the year has been appreciated by the year-end.

39

Insurance House P.S.C. Financial Statements Notes to the financial statements (continued) For the year ended 31 December 2021 24

Impact of COVID-19 on the Company’s operations (continued)

Insurance Risk

The Company underwrites medical and business interruption policies. With regards to these policies, the Company has in place pandemic and infectious disease policy exclusion in place. The Company has evaluated all business interruption policies in force for which the Company may have to incur claim payouts.

As a result of initial examination of the policies, the Company determined that these will not have a material impact in relation to the net claims paid due to lower retention levels of the Company. Furthermore, the Company has been able to retain major customers during the year and has generally witnessed renewals and new business across some major line of business.

Credit risk

The Company attempts to control credit risk by monitoring credit exposures, limiting transactions with specific counterparties and continually assessing the creditworthiness of counterparties.

Liquidity risk

The Company continues to monitor and respond to all liquidity requirements that are presented. The Company continues to calibrate stress testing scenarios to current market conditions in order to assess the impact on the Company. As at the reporting date, the liquidity position of the Company remains strong and is well placed to absorb and manage the impacts of this disruption.

Business continuity plan

The Company has remained fully operational throughout the period and has put in place effective business continuity and remote working plans enabled by the right technologies and systems to ensure uninterrupted services to customers and the operations. The outbreak has not caused any significant delays in policy issuance and claims settlements. The Company will continue to monitor the reverberations of COVID-19, if any, on its customers and operations and will take further action as needed. The steps taken by the Company to estimate the impact of COVID-19 and the judgments applied by management in assessing the value of assets and liabilities as at 31 December 2021 includes both quantitative and qualitative criteria such as risk profiling and actuarial analysis. Such analysis has enabled the Company to timely and accurately identify its exposure although these are subject to significant judgment due to the rapidly changing dynamics of COVID-19.

40